With One False Tweet, Computer-Based Hack Crash Led to Real Panic

by Bert Gambini,  UB NewsCenter

A false tweet sent from a hacked account owned by the Associated Press in 2013 caused the Dow Jones Industrial Average to fall by 143.5 points and the Standard & Poor’s 500 Index to lose more than $136 billion of its value in seconds.

When it was discovered the tweet was fake, the markets corrected themselves nearly as quickly. The event is known as Hack Crash, and demonstrates the need to better understand how social media data is linked to decision-making in the private and public sector, says State University of New York at Buffalo professor Tero Karppi.

Based on its speed, Hack Crash was identified as a computer-based event initiated by sophisticated algorithms designed to identify online content with the potential to influence markets. Those algorithms launched a panicked trading spree resulting in thousands of trades per second. Karppi says, “to know exactly what particular financial algorithms do is almost impossible because of their proprietary nature,” but he adds the incident is an example of algorithms working according to design.

Karppi says the only way to understand Hack Crash is to continue exploring the relationship between social media, the market, and its algorithms. He worked with Kate Crawford of Microsoft Research and the Massachusetts Institute of Technology Center for Civic Media to analyze the Hack Crash in an upcoming issue of Theory, Culture & Society.  Report